Study On Integration Strategy Of Shenyang Yunken Group

In this paper, we systematically diagnose current operating conditions of Shenyang Yunken Group and realize the great legal and reputation risks in product drug residue from the perspective of biggest operating risk of the firm. Currently, broiler products free of drug residue only account for 7 percent of China mainland market. Controlling for drug residue in broiler products is one of the most important tasks facing the entire broiler feeding and processing industry. Firms which can effectively control drug residue in products will realize great-leap-forward development in future market through increasing competitive advantage.Drug residue control is not a technical problem but an industry chain control problem. Yunken Group can effectively control drug residue only through effectively integrating resource advantage in the whole supply chain and properly controlling poultry feeder's feeding behavior by vertical integration strategy. Currently, customers are more concerned about food security and only through horizontal integration strategy can Yunken Group quickly integrate outdated capacity of the industry, occupy high-end market through scale advantage, advertise for food security and realize great-forward leap development.In this paper, by using macro (PEST) and micro (SWOT) analytical methods, we make detail and categorical comparisons between Yunken Group and firms with more advanced management systems both in China and abroad. By focusing on drug residue control and hormonal control, we redesign firm's product layout and investment ratio at different parts of the industry chain. According to China's economic growth and the increase of national consumption level as well as changes in demand of end-customers, we reconsider the product position strategy. By objective market division, we get to the conclusion that the core demand for poultry consumption of medium and high level consumption group is food security and healthy diet, i.e. drug residue control and hormonal control. We find the proper integration strategy for Yunken Group. In order to integrate resource advantages and control drug residue in feeding chain, backward integration includes building strategic partner relationship with bird breeding, incubation, animal feed, animal drug, poultry feeders and leading firms in the industry by methods of joint venture, exercise control, cross ownership and contract cooperation; forward integration strategy includes building strategic partner relationship with resellers in order to make use of resource advantages of reselling chain. These integration strategies can decrease sales chain and supply chain, lower firm's purchasing cost, operation cost and sales cost, increase firm's ability to control cost to compensate the cost increase in drug residue control and increase firm's profitability.In China, only Guangdong Wen's Group, Fujian Shengnong Group and Dalian Dacheng Group have effectively controlled drug residue. But huge investment in the whole industry chain and large risk is not applicable for medium and small firms in development stage. By systematic analysis of poultry breeding and processing industry in United States, Brazil, United Kingdom, Thailand and taking into consideration the current condition of Yunken Group, we get to the conclusion that integration strategy is the best strategy for Yunken's development. To ensure the implementation of integration strategy, we improve firm's organizational structure by enhancing the functional performance of general meeting of shareholders, board of directors, board of supervisors and office of the general manager. We also optimize the composition of board of directors to offset the blind area of decisions made by general manager office meeting. We also set up a project group dedicated to integrating industry chain resources and controlling drug residue. We also establish management policy, which includes executive regular meeting, intellectual selection as well as reward and punishment. We also modify business process and establish cooperation working flow with the consent of downstream and upstream partners. The business flow of internal communication is optimized by the building of information system. We also establish product development flow which is sensitive to the changes in demand of targeted segmented market to ensure the ultimate implementation of firm's integration strategy.